UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1996
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to __________
Commission File Number 0-25096
HORIZON BANCORP, INC.
(Exact name of small business issuer as specified in its charter)
Texas 74-2412835
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification
organization Number)
5800 North MoPac, Austin, Texas 78731
(Address of principal executive offices)
(512) 371-0700
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90
days.
Yes x No
State the number of Shares outstanding of each of the
issuer's classes of common equity, as of the latest date:
As of December 6, 1996, there were 1,388,757 shares of the
Registrant's common stock issued and outstanding.
Transitional Small Business Disclosure Format:
Yes No x
HORIZON BANCORP, INC. AND SUBSIDIARY
FORM 10-QSB
INDEX
Page No
PART I. Financial Information
Item 1. Consolidated Financial Statements:
Consolidated Statements of Financial
Condition as of October 31, 1996 and
April 30, 1996
Consolidated Statements of Operations
for the Three and Six Month Periods
Ended October 31, 1996 and 1995
Consolidated Statements of Cash Flows
for the Six Month Periods Ended
October 31, 1996 and 1995
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations
PART II. Other Information
SIGNATURES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HORIZON BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
October 31, 1996 April 30, 1996
ASSETS
Cash and cash equivalents $ 19,041,042 $ 19,204,098
Federal funds sold 250,000 250,000
Investment securities 11,497,106 8,826,658
Residential mortgage loans
held for sale 1,859,415 2,066,897
Loans receivable - net 106,503,689 91,396,372
Accrued interest receivable 1,063,510 940,197
Foreclosed real estate --- ---
Accounts receivable 267,913 136,079
Federal Home Loan Bank of
Dallas stock 480,100 466,300
Premises and equipment - net 7,089,824 6,140,247
Goodwill, net of amortization 348,346 364,925
Other 497,093 1,137,922
Total Assets $148,898,038 $130,929,695
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $134,398,605 $117,652,564
Advances from FHLB of Dallas --- ---
Advance payments by borrowers
for taxes & insurance 1,111,866 482,397
Accrued interest payable 46,946 45,439
Other 1,525,081 1,554,072
Total Liabilities 137,082,498 119,734,472
STOCKHOLDERS' EQUITY
Serial preferred stock, par value
$.01 per share; 1,000,000 shares
authorized; no shares issued or
outstanding --- ---
Common stock par value $.01 per
share; 4,000,000 shares author-
ized; 1,386,757 shares issued
and outstanding 13,888 13,868
Paid in Capital 6,977,650 6,963,670
Retained earnings 4,847,630 4,279,707
Unrealized loss on available
for sale securities (23,628) (62,022)
Total Stockholders' Equity 11,815,540 11,195,223
Total Liabilities and
Stockholders' Equity $148,898,038 $130,929,695
See notes to consolidated financial statements.
<PAGE>
HORIZON BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
October 31 October 31
1996 1995 1996 1995
Interest income:
Interest on loans $2,953,622 $2,404,885 $5,740,434 $4,826,789
Interest and
dividends on
investments 281,788 286,142 534,430 490,843
Total interest
income 3,235,410 2,691,027 6,274,864 5,317,632
Interest expense:
Interest on deposits 694,174 540,355 1,298,223 1,061,929
Interest on borrowed
funds --- --- 597 ---
Total interest expense 694,174 540,355 1,298,820 1,061,929
Net interest income 2,541,236 2,150,672 4,976,044 4,255,703
Provision for
losses on loans 130,000 60,000 240,000 120,000
Net interest income
after provision for
losses on loans 2,411,236 2,090,672 4,736,044 4,135,703
Non-interest income
(expense):
Loan servicing 67,928 63,112 128,556 121,346
Loan origina-
tion, net 45,073 46,433 94,948 92,963
Other deposit
and loan fees 578,272 370,994 1,042,991 653,648
Credit card fees 32,066 21,460 68,116 32,328
Gain on sale of
loans 278,054 158,264 491,954 265,514
Gain on sale of
foreclosed real
estate --- 62,777 --- 62,777
Other (1,030) --- --- ---
Total non-interest
income 1,000,363 723,040 1,826,565 1,228,576
Non-interest expenses:
Compensation and
benefits 1,165,504 881,373 2,343,148 1,784,546
Occupancy 223,003 176,693 410,976 335,562
Advertising and
business promotion 128,113 137,289 224,631 259,610
Legal and profes-
sional 157,760 102,259 260,647 225,074
Depreciation and
amortization 148,531 106,853 279,394 206,962
Equipment rental
and maintenance 121,008 65,725 216,620 153,312
Service bureau and
processing costs 76,000 79,955 176,178 144,655
FDIC insurance 636,022 51,280 700,711 97,009
General insurance 25,110 20,288 44,519 44,540
Regulatory 5,268 5,134 10,984 11,829
Office supplies and
printing 86,096 88,224 161,725 165,496
Postage and courier
costs 61,267 49,144 116,843 99,429
Telephone 34,719 28,989 67,567 59,512
Property and fran-
chise taxes 68,240 35,025 111,152 71,378
Credit card oper-
ations 115,402 55,346 194,783 106,142
Other 86,296 70,982 150,850 113,287
Total non-interest
expenses 3,138,339 1,954,559 5,470,728 3,878,343
Income before taxes 273,260 859,153 1,091,881 1,485,936
Income tax expense
Federal 88,610 288,023 355,395 506,707
State 12,755 29,200 57,623 30,300
Total income tax
expense 101,365 317,223 413,018 537,007
Net income $ 171,895 $ 541,930 $ 678,863 $ 948,929
Earnings per
common share
Primary $0.12 $0.37 $0.47 $0.65
Weighted average
shares outstanding 1,456,565 1,455,565 1,456,204 1,455,565
Fully diluted $0.11 $0.34 $0.43 $0.60
Weighted average
shares outstanding 1,579,165 1,587,565 1,581,216 1,587,582
Dividends per share $0.04 $0.03 $0.08 $0.06
See notes to consolidated financial statements.
<PAGE>
HORIZON BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
October 31
1996 1995
OPERATING ACTIVITIES
Net Income $678,863 $948,929
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities
Amortization of:
Goodwill 16,579 16,578
Deferred loan origination fees (338,625) (285,515)
Depreciation and amortization of
premises and equipment 379,800 271,544
Premiums and discounts on loans
and investments securities (7,665) (1,120)
Provisions for loan losses and
losses on other assets 240,000 120,000
Proceeds from the sale of loans 18,943,335 16,430,226
Proceeds from sale of
foreclosed loans --- 683,984
Net (gain) loss on sales of:
Loans (491,954) (265,514)
Real estate acquired through
foreclosures --- (62,777)
Changes in assets and liabilities:
Accrued interest receivable (123,313) (61,699)
Accounts receivable and
other assets 508,995 (154,695)
Accrued interest payable 1,507 12,382
Other liabilities (28,991) (20,077)
Net cash provided by operating
activities 19,778,531 17,632,246
INVESTING ACTIVITIES
Purchase of U.S. Treasury
and other securities (2,739,833) (5,986,406)
Loan originations (92,466,047) (81,160,865)
Principal payments received
on loans 67,107,279 58,743,655
Purchase of mortgage-backed
securities --- (576,947)
Principal payments received on
mortgage backed securities 133,479 110,372
Purchase and improvement of branch
facility (1,074,815) ---
Improvement of property and
purchase of office equipment (254,562) (638,855)
Purchase of FHLB stock (13,800) (14,500)
Net cash used in investing
activities (29,308,299) (29,523,546)
FINANCING ACTIVITIES
Net increase (decrease) in demand
deposits, NOW accounts money
market checking accounts and
statement savings accounts 4,982,128 14,409,406
Net increase (decrease) in
certificates of deposit 3,852,056 3,404,517
Net increase (decrease) in
advances from the FHLB --- (2,000,000)
Net increase (decrease)in
advances by borrowers for
taxes and insurance 629,469 488,409
Payment of stockholders dividend (110,941) (83,205)
Stock option exercise 14,000 ---
Net cash provided by (used in)
financing activities 9,366,712 16,219,127
Net increase (decrease) in cash
and cash equivalents (163,056) 4,327,827
Cash and cash equivalents at
beginning of period 19,454,098 18,632,782
Cash and cash equivalents at
end of period $19,291,042 $22,960,609
See notes to consolidated financial statements.
HORIZON BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the
accounts of Horizon Bancorp, Inc. (the "Company") and its wholly-
owned subsidiary, Horizon Bank & Trust, SSB (the "Bank"). The
consolidated financial statements are unaudited except for the
consolidated statement of financial condition at April 30, 1996.
However, in the opinion of management, the interim data includes
all adjustments (which consists of normal recurring accruals)
necessary for a fair presentation of the consolidated financial
statements. Results for any interim period are not necessarily
indicative of results to be expected for the fiscal year. The
financial statements included herein have been prepared by the
Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles (GAAP)
have been condensed or omitted pursuant to such rules
or regulations.
2. INVESTMENT SECURITIES
The amortized cost and estimated market values of investment
securities are summarized as follows:
Gross Gross
Amor- Unreal- Unreal-
tized ized ized Fair Carrying
Cost Gains Losses Value Value
At October
31, 1996
Available
For Sale:
U.S.
Treasury
Secur-
ities $ 3,293,750 $ 944 $(2,528) $ 3,292,166 $ 3,292,166
U.S.
Government
Agency
Secur-
ities 6,796,776 16,459 (76,198) 6,737,037 6,737,037
Municipal
Secur-
ities 1,445,000 22,903 --- 1,467,903 1,467,903
$11,535,526 $40,306 $(78,726) $11,497,106 $11,497,106
At April 30, 1996
Available For Sale:
U.S.
Treasury
Secur-
ities $2,490,174 $ --- $ (6,600) $2,483,574 $2,483,574
U.S.
Government
Agency
Secur-
ities 6,437,333 25,366 (119,615) 6,343,084 6,343,084
$8,927,507 $25,366 $(126,215) $8,826,658 $8,826,658
The amortized cost and estimated market values of investment
securities at October 31, 1996 by contractual maturity are shown
below. Expected maturities will differ from contractual
maturities because borrowers may have the right to prepay
obligations with or without prepayment penalties.
Amortized Fair
Cost Value
At October 31, 1996
Due in one year or less $ 2,299,197 $ 2,299,666
Due from one year to five years 5,329,553 5,331,322
Due from five years to ten years 1,523,571 1,540,118
Due after ten years 2,383,205 2,326,000
Total $11,535,526 $11,497,106
3. LOANS
As of October 31, 1996 and April 30, 1996, the Company's loan
portfolio consisted of the following:
October 31 April 30
1996 1996
Commercial $ 12,720,506 $ 11,676,057
Real estate - permanent mortgages 72,823,639 61,492,247
Real estate - construction 44,850,002 42,645,377
Real estate - lot/lot
development loans 13,536,469 12,988,219
Consumer - credit cards 6,022,807 5,848,358
Consumer - other 4,970,750 4,187,679
Total gross loans 154,924,173 138,832,937
Net deferred loan costs/(fees) (269,516) (269,912)
Undisbursed portion of loans (24,652,929) (25,554,750)
Participations sold (22,796,458) (20,940,096)
Allowance for possible loan losses (780,190) (671,807)
Net loans $106,425,080 $ 91,396,372
Of the total allowance for loan losses at October 31, 1996 and
April 30, 1996 approximately $771,000 and $661,000 respectively
was not allocated specifically to identified problem loans.
The effect of FASB Statement No. 114 as amended by FASB Statement
No. 118 effective May 1, 1995 was not material to the financial
statements, and as such, has not been separately disclosed.
4. REGULATORY CAPITAL REQUIREMENTS
Pursuant to federal law, the Bank must meet separate regulatory
capital requirements. The Bank's FDIC capital requirements at
October 31, 1996 are as follows:
At October 31, 1996
(Dollars in Thousands)
Amount Percent
Leverage capital ratio:
Capital level $10,820 7.8%
Requirement 5,587 4.0
Excess $ 5,233 3.8%
Tier I risk based capital ratio:
Capital level $10,820 10.6%
Requirement 4,098 4.0
Excess $ 6,722 6.6%
Total risk based capital ratio:
Capital level 1 $11,591 11.3%
Requirement 8,196 8.0
Excess $ 3,395 3.3%
1 Includes the Bank's general valuation allowance of
$771,000 which qualifies as supplemental capital.
5. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, there are various outstanding
commitments to extend credit and letters of credit, which are not
reflected in the financial statements. Management does not
anticipate any material loss as a result of these transactions.
6. REGULATORY DEVELOPMENTS
The deposits of savings banks, such as the Bank, are presently
insured by the SAIF, which together with the BIF, are the two
insurance funds administered by the FDIC. Financial institutions
which are members of the BIF are experiencing substantially lower
deposit insurance premiums because the BIF has achieved its
required level of reserves while the SAIF has not yet achieved its
required reserves. In order to help eliminate this disparity and
any competitive disadvantage due to disparate deposit insurance
premium schedules, legislation to recapitalize the SAIF was enacted
in September, 1996.
The legislation requires a special one-time assessment of
approximately 65.7 cents per $100 of SAIF insured deposits held by
the one-time special assessment has resulted in a tax affected
charge to earnings of approximately $351,000 during the quarter
ended October 31, 1996. The legislation is intended to fully
recapitalize the SAIF fund so that commercial bank and thrift
deposits will be charged the same FDIC premiums beginning October
1, 1996. As of such date deposit insurance premiums for highly
rated institutions, such as the Bank, have been eliminated.
The Bank however, will continue to be subject to an assessment to
fund repayment of the FICO obligations. It is anticipated that the
FICO assessment for SAIF insured institutions will be 6.5 cents per
$100 of deposits while BIF insured institutions will pay 1.3 cents
per $100 of deposits until the year 2000 when the assessment will
be imposed at the same rate on all FDIC insured institutions.
PART I Item 2
HORIZON BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The accompanying Consolidated Financial Statements includes
Horizon Bancorp, Inc. (referred to herein both separately and on
a consolidated basis as the "Company") and its wholly owned
subsidiary Horizon Bank & Trust, SSB (the "Bank"). All
significant intercompany transactions and balances are eliminated
in consolidation. The Company is a savings & loan holding
company which owns all of the capital stock of the Bank and has
no other material operations. The Company's results of
operations are primarily dependent on the difference or "spread"
between the average yield earned from loans, investment
securities and the average rate paid on deposits and borrowed
funds. The interest rate spread is affected by regulatory,
economic and competitive factors that influence interest rates,
loan demand and deposit flows. The Company is subject to
interest rate risk to the degree that its interest earning assets
mature or reprice at different times or on a different basis than
its interest bearing liabilities. The Company's net income is
also affected by the level of non-interest income such as the
gain on sale of loans, the gain on the sale of servicing rights,
deposit fees and the level of non-interest expenses, such as
compensation and benefits occupancy expenses, legal and
professional fees, data processing expenses, advertising and
business promotion and other general and administrative expenses.
FINANCIAL CONDITION
Comparison of Financial Condition as of October 31, 1996 to April
30, 1996. The Company's total assets at October 31, 1996 of
$148.9 million increased by $18.0 million, or 13.8%, from $130.9
million at April 30, 1996. This increase was due primarily to
increases in investment securities of $2.7 million and loans
receivable, including loans held for sale of $14.9 million.
The Company's total liabilities at October 31, 1996 of $137.1
million increased $17.4 million, or 14.5%, from $119.7 million at
April 30, 1996. This increase was due primarily to an increase
of $16.7 million in total deposits. The increase in deposits
reflects the Company's ongoing efforts to attract non-interest
bearing commercial checking accounts, NOW accounts, and money
market accounts as a significant source of deposits. In
addition, the Company instituted a certificate of deposit
promotion which resulted in a $6.8 million increase in
certificates of deposit.
The Company's retained earnings at October 31, 1996 of $4.8
million increased $568,000, or 11.7%, from $4.3 million at April
30, 1996. This resulted from earnings of $679,000 and the
payment of $111,000 in dividends to shareholders.
RESULTS OF OPERATIONS
Comparison of Operating Results for the Three Months Ended
October 31, 1996 and October 31, 1995. The Company had net
income of $172,000 for the three month period ended October 31,
1996 as compared to $542,000 for the three month period ended
October 31, 1995. This increase is discussed in more detail in
the following analysis.
Interest Income. Interest income from loans increased $549,000,
or 22.8%, from $2.4 million for the three month period ended
October 31, 1995 to $2.9 million for the three month period ended
October 31, 1996. The increase was due to an increase in the
average loan portfolio balance of $26.4 million which was
partially offset by a decrease in the average yield from 12.2% to
11.2% for the same respective periods. The decrease in the
average yield related primarily to a .75% decrease in the
Company's base lending rate which is tied to the Wall Street
Journal prime rate index. A substantial portion of the Company's
loan portfolio is indexed to the Company's base lending rate as
it changes. The Company was also subjected to interest rate
competition from other lending institutions in its market which
resulted in reduced rates on new loan originations in order to
stay competitive.
Interest Expense. Interest expense on deposit liabilities
increased $154,000, or 28.5%, from $540,000 for the three months
ended October 31, 1995 to $694,000 for the three months ended
October 31, 1996. The increase was due primarily to an increase
in the average amount of interest bearing deposits from $65.5
million for the three months ended October 31, 1995 to $82.8
million for the three months ended October 31, 1996.
Provision for Loan Losses. The provision for losses on loans was
$130,000 for the three months ended October 31, 1996 and $60,000
for the three months ended October 31, 1995. The Company's
allowance for loan losses was based on management's analysis of
historic loan losses, current economic conditions, the level of
non-performing loans and management's current belief that the
allowance for loan losses reflect an adequate reserve against
potential losses. Although the Company maintains its allowance
for loan losses at a level which it considers to be adequate to
provide for potential losses, there can be no assurance that
future losses will not exceed estimated amounts or that
additional provisions for loan losses will not be required in
future periods. In addition, the Company's determination as to
the amount of the allowance for loan losses is subject to review
by the regulatory agencies which can order the establishment of
additional general and specific allowances.
Non-Interest Income. Non-interest income increased $277,000 to a
total of $1.0 million for the three months ended October 31, 1996
compared to $723,000 for the three months ended October 31, 1995.
Fees and charges related to loans and deposits increased
$207,000. Most of the increase was due to an overall increase in
deposit fees which was the result of a substantial increase in
the number of transaction accounts and an increase in the amount
of some fees. Gain on the sale of loans increased $120,000 to a
total of $278,000 for the three months ended October 31, 1996
compared to $158,000 for the three months ended October 31, 1995.
This increase resulted primarily from an increased volume of
originations and sales of Small Business Administration (SBA)
guaranteed loans.
Non-interest Expense. Non-interest expense increased $1.2
million to a total of $3.1 million for the three months ended
October 31, 1996 compared to $1.9 million for the three months
ended October 31, 1995. Compensation and benefits increased
$285,000 to a total of $1.2 million for the three months ended
October 31, 1996 compared to $881,000 for the three months ended
October 31, 1995. This increase resulted primarily from a
general increase in employee salary levels, both for merit and as
a response to a competitive job market in the Central Texas area,
and an increase in the average number of full time equivalent
employees from 106 to 121. In addition, incentive compensation
associated with origination of SBA loans increased approximately
15.0%. Occupancy expense increased $46,000 primarily as the
result of writing off the balance of unamortized leasehold
improvements on the old central business district branch which
was moved to a new location in October, 1996. Legal and
professional expenses increased $56,000 due in part to legal and
accounting fees associated with the negotiations which resulted
in execution of a letter of intent to be acquired by Compass
Bancshares, and a review of the Company's credit card portfolio
by a third party consultant. Depreciation and amortization
expense increased $42,000 primarily due to the opening of a new
branch and the relocation of a branch. Equipment rental and
maintenance expense increased $55,000 due in part to the opening
of the aforementioned branch, the leasing of additional automated
teller machines and some major equipment repair. FDIC insurance
premiums increased $585,000 due primarily to the payment of a
one-time premium of $571,000 to recapitalize the SAIF fund.
Credit card operations expense increased $60,000 (expenses
uniquely associated with credit card program not included in
other line items) due to significant growth in credit card
accounts and balances.
Income Tax Expense. Income tax expense decreased $216,000, or
68.1%, from $317,000 for the three months ended October 31, 1995
to $101,000 for the three months ended October 31, 1996. The
decrease was due to a decrease in taxable income, primarily as
the result of the one-time FDIC premium, in the current period
versus the prior period.
Comparison of Operating Results for the Six Months Ended October
31, 1996 and October 31, 1995. The company had net income of
$679,000 for the six month period ended October 31, 1996 as
compared to $949,000 for the six month period ended October 31,
1995. This decrease is discussed in more detail in the following
analysis.
Interest Income. Interest income from loans increased $913,000,
or 18.9%, from $4.8 million for the six months ended October 31,
1995 to $5.7 million for the six months ended October 31, 1996.
The increase was due to an increase in the average loan portfolio
balance of $24.6 million which was partially offset by a decrease
in the average yield from 12.4% to 11.2% for the same respective
periods. The decrease in the average yield related primarily to
a .75% decrease in the Company's base lending rate which is tied
to the Wall Street Journal prime rate index. A substantial
portion of the Company's loan portfolio is indexed to the
Company's base lending rate as it changes. The Company was also
subjected to interest rate competition from other lending
institutions in its market which resulted in reduced rates on new
loan originations in order to stay competitive.
Interest Expense. Interest expense on deposit liabilities
increased $236,000, or 22.2%, from $1.1 million for the six
months ended October 31, 1995 to $1.3 million for the six months
ended October 31, 1996. The increase was due primarily to an
increase in the average amount of interest bearing deposits from
$62.9 million for the six months ended October 31, 1995 to $77.8
million for the six months ended October 31, 1996.
Provision for Loan Losses. The provision for losses on $120,000
loans was $240,000 for the six months ended October 31, 1996 and
$120,000 for the six months ended October 31, 1995. The
Company's allowance for loan losses was based on management's
analysis of historic loan losses, current economic conditions,
the level of non-performing loans and management's current belief
that the allowance for loan losses reflect an adequate reserve
against potential losses. Although the Company maintains its
allowance for loan losses at a level which it considers to be
adequate to provide for potential losses, there can be no
assurance that future losses will not exceed estimated amounts or
that additional provisions for loan losses will not be required
in future periods. In addition, the Company's determination as
to the amount of the allowance for loan losses is subject to
review by the regulatory agencies which can order the
establishment of additional general and specific allowances.
Non-Interest Income. Non-interest income increased $598,000 to a
total of $1.8 million for the six months ended October 31, 1996
compared to $1.2 million for the six months ended October 31,
1995. Fees and charges related to loans and deposits increased
$389,000. Most of the increase was due to an overall increase in
deposit fees which was the result of a substantial increase in
the number of transaction accounts and an increase in the amount
of some fees. Gain on the sale of loans increased $226,000 to a
total of $492,000 for the six months ended October 31, 1996
compared to $266,000 for the six months ended October 31, 1995.
This increase resulted primarily from an increased volume of
originations and sales of Small Business Administration (SBA)
guaranteed loans.
Non-interest Expense. Non-interest expense increased $1.6
million to a total of $5.5 million for the six months ended
October 31, 1996 compared to $3.9 million for the six months
ended October 31, 1995. Compensation and benefits increased
$558,000 to a total of $2.3 million for the six months ended
October 31, 1996 compared to $1.8 million for the six months
ended October 31, 1995. This increase resulted primarily from a
general increase in employee salary levels, both for merit and as
a response to a competitive job market in the Central Texas area,
and an increase in the average number of full time equivalent
employees from 106 to 120. In addition, incentive compensation
associated with origination of SBA loans increased approximately
17.0%. Occupancy expense increased $75,000 primarily as the
result of relocation of two branches and the opening of another
branch. Depreciation and amortization expense increased $72,000
primarily due to the aforementioned opening and relocation of
branches. Equipment rental and maintenance expense increased
$64,000 due to the opening and relocation of branches and the
leasing of additional automated teller machines. FDIC insurance
premiums increased $604,000 due primarily to the payment of a
one-time premium of $571,000 to recapitalize the SAIF fund.
Credit card operations expense increased $89,000 (expenses
uniquely associated with credit card program not included in
other line items) due to a significant growth in credit card
accounts and balances.
Income Tax Expense. Income tax expense decreased $124,000, or
23.1%, from $537,000 for the six months ended October 31, 1995 to
$413,000 for the six months ended October 31, 1996. The decrease
was due to a decrease in taxable income, primarily as the result
of the one-time FDIC premium, in the current period versus the
prior period.
Liquidity Requirements. Texas law specifically requires that the
Bank maintain a minimum of 10.0% of its assets in cash, balances
in a Federal Reserve Bank or passed through a Federal Home Loan
Bank or other depository institution to a federal reserve bank or
other readily marketable investments, including unencumbered
federal government sponsored enterprise securities. At October
31, 1996 the Bank's regulatory liquidity ratio was 22.34%.
Regulatory Capital. The Bank continued to be in compliance with
all FDIC regulatory capital requirements at October 31, 1996.
See Note 4 to the Consolidated Financial Statements.
Asset Quality. Non-performing assets, which consist of non-
accrual loans, foreclosed assets, and repossessed assets,
decreased during the six months ended October 31, 1996 to $11,000
compared to $13,000 at April 30, 1996. The following table sets
forth information with respect to the Company's non-performing
assets:
At At At
October 31 July 31 April 31
1996 1996 1996
( Dollars in Thousands )
Non-accrual loans:
Residential real estate $ -- $ -- $ --
Commercial real estate -- -- --
Commercial business 11 12 13
Consumer -- -- --
Total non-accrual loans 11 12 13
Real estate owned and other assets -- -- --
Total non-performing assets $ 11 $ 12 $ 13
Non-accrual loans as a percentage
of total net loans (1) .01% .01% .01%
Non-performing assets as a per-
centage of total assets .01% .01% .01%
(1) Excludes deferred fees and discounts, valuation allowances,
loans in process and loans held for sale.
The following table sets forth an analysis of the Company's
allowance for loan losses for the periods indicated.
Three Months Ended Six Months Ended
July 31 October 31
1996 1995 1996 1995
Balance at beginning of period $ 730 $ 674 $ 672 $ 734
Charge offs:
Residential real estate -- 66 -- 92
Commercial real estate -- -- -- 26
Commercial business -- -- -- --
Consumer 1 -- -- 3
Credit cards 79 36 63 --
Total charge offs 80 102 63 121
Recoveries
Residential real estate -- -- -- --
Commercial real estate -- -- -- --
Commercial business -- 1 11 1
Consumer -- -- -- --
Credit cards -- -- -- --
Total recoveries -- 1 11 1
Net charge offs (recoveries) 80 101 52 120
Provision charged to operation 130 60 110 60
Balance at end of period $ 780 $ 633 $ 730 $ 674
Ratio of net charge offs
(recoveries) during the period
to average net loans outstand-
ing during the period (1) 0.08% 0.13% 0.13% 0.28%
Ratio of net charge offs
(recoveries) during the period
to average non-performing
assets 17.94% 17.18% 35.68% 69.28%
(1) Excludes deferred fees and discounts, valuation allowances,
loans in process and loans held for sale.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - Previously reported
Item 2. Change in Securities - Previously reported
Item 3. Defaults upon Senior Securities - Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Shareholder Meeting on September 24,
1996 for the purpose of acting on proposals to: (i) elect two
directors, (ii) adopt the Company's 1997 Stock Option and
Incentive Plan, (iii) amend the Company's 1992 Compensatory Stock
Option Program and (iv) ratify the appointment of BDO Seidman as
independent auditors for the Company.
Election of Directors. At the Annual Meeting, two persons were
elected to serve a term of three years and until their successors
have been elected and qualified. Paul A. Antrim and Michael
Rotman, M.D. were elected as directors to serve until 1999. The
other directors who are continuing in office after the Annual
Meeting include: Douglas B. Kadison and Charles S. Nichols, Jr.
whose terms as directors extend until 1997, and Robert J. Ellis
whose term as director extends until 1998. The votes of record
voted for the election of Antrim and Rotman were 1,052,856 and
1,052,106, no voting against and 1,998 and 2,748 shares being
withheld, respectively. Accordingly, Antrim and Rotman were
declared to be duly elected directors of the Company for the term
described above.
1997 Stock Option and Incentive Plan. The next proposal to come
before the Meeting was the approval of the 1997 Stock Option and
Incentive Plan (the "Plan"). The Plan provides for awards in the
form of stock options, stock appreciation rights, limited stock,
appreciation rights, and restricted stock. Up to 65,000 shares
of the Company's Common Stock may be awarded under the Plan.
Under the Plan, 64 employees, officers, directors, and advisory
directors will be eligible to participate in the Plan. A more
detailed description of the principal features of the Plan and a
copy of the Plan are included in the Definitive Proxy Statement
of the Company dated August 8, 1996. The number of votes cast
for the proposal was 990,519, against the proposal was 31,244,
abstentions included 5,998 shares and there were no broker non-
votes.
Amendment to 1992 Compensatory Stock Option Program. The
shareholders next considered a proposal to amend the 1992
Compensatory Stock Option Program. The Company adopted a
Compensatory Stock Option Program in 1992 to award stock options
for 68,808 shares of the Company to Douglas B. Kadison, Charles
S. Nichols, Jr., Paul A. Antrim, and William Waxman (collectively
the "Option Holders") each of whom personally guaranteed certain
debts of the Company. The Program was approved by the
shareholders of the Company and the options were issued pursuant
to Stock Option Agreements to the Option Holders. Under their
terms, the Options could only be exercised if (i) all of the debt
of the Company existing as of September 30, 1992 had been fully
paid and satisfied, (ii) any pledge of the Company's stock of
Horizon Bank & Trust, SSB to secure the debt of the Company must
have been approved by the holders of the Company's capital stock
entitled to vote at least 66 2/3% of the shares of all classes of
the Company, and (iii) the book value per share of the Common
Stock must be at least $3.50 per share of the Common Stock.
These conditions for exercise have been met for the last two
fiscal years and the Board of Directors of the Company felt
that they are no longer necessary. Furthermore, condition (ii)
would impair the Option Holder's ability to exercise these
options if the Company decided to borrow funds secured by the
stock of the Bank. The purpose of the amendment to the
Program is to delete these exercise conditions from the Program.
The number of votes cast for the proposal was 994,008, against
the proposal was 27,494, abstentions included 6,134 shares, and
there were no broker non-votes.
Selection of Accountants. The final proposal considered at the
Annual Meeting was a ratification of the appointment of BDO
Seidman as independent auditors for the Company for the year
ended April 30, 1997. The number of votes cast for the proposal
was 1,053,854, against the proposal was 1,000, no abstentions,
and there were no broker non-votes.
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits - Previously filed.
b. Reports on Form 8-K
September 27, 1996 a Form 8-K was filed by
the Company covering Item 5 of Form 8-K.
December 6, 1996 a Form 8-K was filed by
the Company covering Item 5 of Form 8-K.
SIGNATURES
In accordance with the requirements of the Securities and
Exchange Act of 1934, the Registrant caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
HORIZON BANCORP, INC.
Registrant
Date: December 11, 1996 By: /s/
Douglas B. Kadison
President and Chief Executive
Officer
Date: December 11, 1996 By: /s/
Paul A. Antrim
Executive Vice President and
Chief Financial Officer
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